India's largest insurer Life Insurance Corporation (LIC) of India Ltd will purchase 14.9 percent equity stake in IDBI Bank, as a first step towards taking majority ownership in the lender.
LIC has given "in principle approval for subscription of the equity shares on preferential basis subject to their total exposure not exceeding 14.90 percent of post issue capital of IDBI Bank at any point of time...", the bank said in a stock exchange notification on Tuesday. The state-owned lender will approach its shareholders for an approval on this deal on August 31, the notification said.
According to B Sriram, managing director of IDBI Bank, this is the first tranche of the deal between LIC and IDBI Bank.
The government had earlier approved a transfer of 51 percent majority ownership in IDBI Bank to LIC. However, for LIC to increase stake in the bank beyond 15 percent, approvals are needed from the insurance regulator. Also the Reserve Bank of India's approval is needed for the transfer of majority ownership to LIC. (Source : Bloomberg).